TBA action leads to 1071 injunction victory!
... the 1071 injunction is a real and historic win that shows what we can do together ...”
On July 31, U.S. District Court Judge Randy Crane granted the Texas Bankers Association, Rio Bank of McAllen and the American Bankers Association members an injunction order that blocks the Consumer Financial Protection Bureau from further implanting the Section 1071 small business data collection rule until the Supreme Court rules on the constitutionality of CFPB funding, probably next summer. This is a major victory for Texas banks.
The practical impact is that the TBA-Rio Bank-ABA injunction covers most community banks in Texas and, indeed, most banks across the U.S. It will literally save banks millions of dollars in unrecoverable planning and compliance preparation costs for a rule that may be vacated.
Judge Crane further ordered that 1071 compliance dates for our members be delayed. The best outcome is that 1071 will be thrown out. Even under the worst scenario, compliance is now pushed back by years for our community bank members.
I would like to thank the TBA Executive Committee and Board of Directors, as well as the Rio Bank Board, for their proactive leadership. Earlier this year, the TBA Board did not hesitate or wait for others to act. On behalf of fellow community bankers, they authorized TBA staff to pursue legal action if the 1071 Final Rule was not substantively changed and would hurt community banks and the small business customers 1071 was supposed to help. Upon its release, CFPB’s massive and over-reaching 1071 Final Rule changed little from the proposal, so we filed suit on April 26. ABA joined the suit in mid-May, and we filed the motion for preliminary injunction on May 26.
As noted by Judge Crane in his order, “Plaintiffs assert that the injunction should be nationwide; otherwise, ‘limiting the relief to certain jurisdictions or parties would create patchwork rulings that would undermine the injunction and create unequal enforcement of an agency Rule that is invalid.’” However, CFPB argued for limiting the injunction to TBA and ABA members and that is what the Court ordered. We continue to seek an expanded scope for all banks, regardless of affiliation.
But our injunction victory demonstrated that we can win when we are willing to stand up and fight back against ideologues and bureaucrats who want to politicize our industry and institute another compliance layer that complicates borrowing for small businesses and crushes smaller banks that support them. The action taken by TBA, Rio Bank and ABA has motivated other trade groups across the country to file suits challenging the out-of-control and overreaching CFPB on 1071. TBA has been proud to take on this leading role.
However, it is vital to communicate that TBA recognizes that the preliminary injunction is just that — preliminary. The ultimate objective is to win TBA’s larger and still active lawsuit against CFPB to defeat the rule on constitutional grounds, as well as the Bureau’s failure to follow the Administrative Procedures Act. Using a multi-prong approach, we will further support legislation to defeat 1071, like Texas U.S. Rep. Roger Williams’ Joint Congressional Resolution (H.J. Res. 66).
There is much more to do, but the 1071 injunction is a real and historic win that shows what we can do together when we take action and fight for our banks and customers.
See Celeste Embrey’s legal assessment of the 1071 Preliminary Injunction Order in her September/October 2023 Your Advocate column.